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Saturday, 30 July 2011

Frantic US debt talks!

Oliver Knox

White House talks on averting a disastrous debt default have resumed and are closing in on a compromise with just three days to act, says US President Barack Obama's top senate ally.

Democratic US Senate Majority LeaderHarry Reid has put off a contentious procedural vote on a White House-backed plan to avert a disastrous debt default, citing progress toward a compromise.

"There are negotiations going on at the White House to avert a catastrophic default on the nation's debt," said the Democrats' Senate leader Harry Reid in a late-night announcement on Saturday.

"There are many elements to be finalised and there is still a distance to go."

Obama, his Democratic allies and his Republican foes have been hunting for a breakthrough deal that would ensure the world's richest nation will have cash to pay its bills past next Tuesday's deadline.

Reid said that, at the White House's request, he was putting off until Sunday afternoon, Washington time, a test vote on his own plan to raise the $US14.3 trillion ($A13.03 trillion) American debt ceiling to allow time for a possible compromise.

"They've asked me to give everyone as much time as possible to reach an agreement - if one can be reached," Reid said.

"I'm glad to see this move toward cooperation and compromise. I hope that it bears fruit," said Reid, who said he was "confident" that a final deal would embrace a long-term increase in the US debt ceiling.

The US economy hit the debt limit on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally - but can do so only through August 2.

Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 per cent following the 2008 global meltdown.

Without a deal, the US government will have to cut an estimated 40 cents out of every dollar it spends, forcing grim choices between defaulting on its debt or cutting back on programs like those that help the poor, disabled and elderly.

Any compromise would still need to clear the divided Democratic-led Senate and Republican-held House of Representatives, where conservatives close to the Tea Party movement have called for draconian belt-tightening.

Reid's announcement came after Obama called him and Democratic House Minority Leader Nancy Pelosi to an urgent White House summit with Vice-President Joe Biden and spoke by telephone to top Senate Republican Mitch McConnell.

McConnell declared himself "confident and optimistic that we're going to get an agreement in the very near future" and predicted that most Democrats would "fall in line" behind any deal the president cut with Republicans.

Republican House Speaker John Boehner said in a joint press conference with McConnell on Saturday that they were both confident that "we're going to be able to come to some agreement with the White House and end this impasse".

Reid had poured cold water on the upbeat Republican message, bluntly telling McConnell that talk of a looming deal was "not true" and insisting that "merely saying you have an agreement in front of television cameras doesn't make it so".

Hours later, Reid changed his tune and announced he was putting off a test vote during the weekend aimed at ending the crisis.

Senate Republicans had been expected to kill the measure, citing what they considered to be insufficient guarantees of steep spending cuts to offset the increase in the US national debt.

Details of the burgeoning accord were not immediately available but Reid said he was "confident" that a final deal would meet Obama's condition of putting off another debt fight until after his November 2012 re-election bid.

Earlier, aides said key points of contention included the overall size and makeup of spending cuts, and the creation of a special committee of congressmen and senators tasked with finding more savings in the near future.

They also included a fight over an enforcement mechanism to ensure that the new panel agrees to future spending cuts, notably to cherished social safety net programs, according to a senior Republican senate aide.

It was unclear whether the deal would be enough to talk ratings agencies from downgrading the sterling Triple-A US debt rating, causing a lift in interest rates that would throw a wrench into the gears of the already sputtering US economy.

The acrimonious talks came after the Republican-led House of Representatives voted to kill Reid's proposal for raising the debt limit, a day after the Democratic-held Senate did the same to Boehner's plan.

2 comments:

Noted that "The US economy hit the debt limit on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally - but can do so only through August 2, 2011"